Kodal Minerals (LON: KOD) shares are up 13% this morning. KOD shares have risen on the basis of a prepayment for the Bougouni lithium project in Mali. We have a feeling that this is much more interesting than the initial announcement makes out. As we’ve pointed out before the problem is the transfer of mining licences across to the new corporate entity. We have a feeling that this prepayment is a method of dealing with that problem.
As we’ve said before about Kodal: “The processor gains a derisked source of material for their plant. The mine gains finance and a takeoff contact - a derisked buyer for production. Given that market structure it is actually a significant signal that a project is not serious if it cannot gain finance from one of the processors. So, the Kodal Minerals contract with Hainan actually operates in these second and third ways. Firstly, it provides the capital for development and so on - that's good, no cash call on shareholders. Secondly, it works as a validation of all of the claims and statements so far. If Hainan's willing to send that much money to Kodal then what Kodal says is probably true…..” Everything we know so far tells us that there’s a real and viable lithium mine here. So, Kodal’s worth money because it hsa a real and viable lithium mine.
Kodal Minerals share price from Google Finance.
But as we’ve also said about Kodal Minerals: “Kodal Minerals (LON: KOD) has done very well in getting the Bougouni lithium project to the stage that it has. There is a little hitch in this final leg of the financing process: “The extension will provide additional time for certain conditions precedent to be satisfied, including the transfer of the Bougouni Project to a new Mali mining company owned by Kodal's recently incorporated UK subsidiary, Kodal Mining UK Limited ("KMUK"). This restructuring is in progress although is not expected to complete by 30 April 2023, the original deadline, and accordingly, the parties have agreed to extend the completion deadline for the funding package to 31 May 2023.” Well, yes, OK, dealing with bureaucracy in Africa. We're shocked, eh?” Here we are in August and this paperwork problem has still not been solved.
At which point we get a change in the contract between Hainan and Kodal: “Kodal Minerals, the mineral exploration and development company focused on lithium and gold assets in West Africa, announces a conditional prepayment of US$3,500,000 (the "Prepayment") as part of the funding package for the Bougouni Lithium Project announced on 19 January 2023 (the "Funding Package") agreed between the Company and Hainan Mining Co. Limited ("Hainan") and its wholly owned UK-incorporated subsidiary Xinmao Investment Co. Limited ("Xinmao" and together, the "Hainan Group").” Kodal gets to use that money however it wants. And, well, it’s always possible to have a suspicion or two - perhaps that money is going to be used to solve that paperwork problem?
That would be value additive for Kodal, actually getting that problem solved. Although it does rather depend on how that money is used to solve that problem.
